Using Climate Economy Modelling to integrate climate risks into long-term economic and adaptation planning
Utiliser la modélisation de l’économie climatique pour placer les risques climatiques au centre d’une perspective économique et d’un plan d’adaptation à long terme.
Economics of Climate Adaptation considers the need to assess the economic impact of climate risks and to develop adaptation options that contribute to economic development and human well-being in a systemic way. In the context of Policy and Planning, Climate Economy Modelling has emerged as a key instrument for evidence-based decision-making. It refers to the use of climate-sensitive macroeconomic models to integrate climate risks into long-term economic and adaptation planning.
Enabling Climate-Resilient Economic Development
Climate change is one of the greatest threats facing humanity, with far-reaching and devastating impacts on people, the environment, and the economy. Accelerating climate change adaptation is a human, environmental, and economic imperative. With expected strong impacts of climate change on economic growth and development, it becomes critical to include a long-term and economic perspective in adaptation planning and risk management. Planning and implementation of adaptation measures focusing only on short-term, incremental effects could result in maladaptation, which increases vulnerability in the long-term. As explained in the UNEP Adaptation Gap Report from 2024, “to meet the scale of the climate change challenge, adaptation financing needs to shift from the historic focus on reactive, incremental and project-based financing towards more anticipatory, strategic and transformational adaptation” (Adaptation Gap Report 2024 | UNEP – UN Environment Programme).
Planning and investing in systemic adaptation actions, and in the innovations that come with it, can unlock new opportunities, and provide a triple dividend: they avoid economic losses, support economic growth, and deliver additional socio-economic and environmental benefits.
Assessing Climate Risks and Improving Adaptation Actions
Systemic, effective, and growth-aligned adaptation actions need an improved evidence base for assessing the climate-related risks that economies are facing. They enable deciding on the most efficient adaptation strategies in terms of cost-effectiveness as well as reduced economic losses and achieved economic, socio-economic and environmental benefits. Including macroeconomic effects into assessment and planning of adaptation actions enables policy actors to make the necessary investments for directing the economy towards climate resilience.
Risks without Systemic Adaptation Actions
Climate Economy Modelling refers to the use of climate-sensitive macroeconomic models to incorporate climate risks into long-term economic and adaptation planning. It introduces macroeconomic modelling as an instrument to assess the economy-wide impacts of climate hazards and to evaluate sector-specific and economy-wide adaptation measures that contribute to climate resilience. The results inform key planning documents such as national adaptation plans (NAPs), nationally determined contributions (NDCs), (low emission) long-term strategies and other national development plans.
Climate Economy Modelling therefore is an instrument that supports Economics of Climate Adaptation by:
The instrument includes different aspects:
Key steps of Climate Economy Modelling:
Source: CRED Factsheet.
The Handbook on Macroeconomic Modelling describes for each of these steps:
Steps for replicating Climate Economy Modelling in a new context:
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